Electronic checking, Web bill pay and other alternative means to move money are growing, but it will likely be many years before paper checks are marginalized to the point of insignificance for banks, if it ever happens.
So as banks ramp up electronic payments and check processing platforms, they need to manage a volume of traditional checks, that while declining, is still substantial. "The number of checks that people are using is diminishing," says Chuck Tufts, evp of retail services for U.S. Bancorp. "But we're also seeing double-digit new customer growth. So our existing customers are using checks in a lower amount, but the ordering of new checks has remained stable. I don't see checks falling out of our economy in the future."
So that leaves the question of what banks are going to do to manage the remaining portion of checking that's still paper-based while tackling the deployment of more complex payment options. One possible solution is to hire a firm to manage the actual production and management of check programs, and using the resulting savings in staff time to redeploy customer service resources.
U.S. Bancorp, the nation's sixth-largest financial institution with nearly $210 billion in assets, has hired Deluxe Financial Services to handle the institution's check printing and related services. The bank will use DeluxeSelect and Deluxe Business Advantage to manage consumer and business check programs while working to improve check-related customer service. "Our bankers can't be experts in check printing. We want them to be experts in banking," says Tufts.
Deluxe hopes an increasing number of banks wishing to lighten their traditional checking workload will lead to opportunity. "As checks become more commoditized, we are looking for a way to make checking simple to operate," says Rich Frieder, vp of marketing for Deluxe Financial Services.
The benefit for the bank is the removal of check management, as DeluxeSelect offers products directly to retail consumers on behalf of the bank. The business checking service offers personalized services designed to meet the needs of small business customers while boosting check-order revenue and retention. "When a small business customer comes into a bank to open an account, if we can make the check ordering process easier, it makes the customers happier," Tufts says. "And it makes the bankers happier if they can shorten the time they need to spend with someone who's opening a new account and move on the next customer."
It's the sort of move that banks have made in the past, but with traditional checking being joined by other modes of payments. Industry experts say these sorts of deals are a good way to allow another firm to handle check ordering, which isn't the competitive differentiator that it used to be.
"Check volume is declining over time, but it's going to take many years for checks to go away altogether," says Mary Pilecki, a senior analyst in financial services for Forrester Research. "Outsourcing what doesn't contribute to a competitive advantage is a smart thing," she says. "That leaves you with the resources and time to figure out where you can make a difference."
Pilecki says outsourcing favors larger banks, though any bank with a high volume of check ordering can benefit by having the ordering function taken off of their hands. "When you open a new account at a branch, the branch can put you on the phone with a company to order your checks, or put you on a kiosk to order them online."
There are also increased efficiencies in providing customer service to business clients, which typically have more complex checking needs than consumers, and as such are more challenging to service in-house. "Banks don't have the capacity in their call centers to handle lots of check calls when they are trying to improve efficiencies," Pilecki says.
Tufts says the move further enhances check-related customer service, since Deluxe will dispatch experts to businesses to handle problems or question, another way for the bank to enhance service without deploying extra staff.
The move also allows U.S. Bancorp to take advantage of new innovation in traditional checking. The bank is utilizing a feature that places personalized marketing messages into checkbooks, based on CRM technology that works to predict a customer's next purchase at the bank. "A lot of marketing message don't get looked at, but when the message is strategically placed behind the fifth or sixth check in a check book, a customer has an opportunity to look at the marketing more in depth when he's at home writing checks to pay monthly bills," Tufts says.
